Infometrics says we should look to the 1930s for a solution to help the economy recover from a COVID-19 recession by building more state houses

Infometrics says we should look to the 1930s for a solution to help the economy recover from a COVID-19 recession by building more state houses
Photo: Archives New Zealand

By Gareth Kiernan*

Infometrics believes the government has a clear opportunity to address New Zealand’s shortage of social housing and support the residential construction industry by significantly increasing construction of state houses over the next two years..

The waiting list for state houses has more than quadrupled since mid-2015, but high levels of construction have limited the government’s ability to respond to this burgeoning need. With private sector development likely to be slashed during the rest of 2020 and 2021, Infometrics believes now is the ideal time for the continued shrinkage of New Zealand’s state housing stock to be reversed.

Rents have continually risen faster than incomes since 2011, leading to large increases in the state house waiting list in areas such as Gisborne, Napier, and Rotorua.

The government needs to take quick action to start addressing this crisis now. The number of vulnerable people needing housing assistance is set to jump further as unemployment spikes over the next 18 months.

Infometrics also forecasts that the annual residential build rate will drop from almost 38,000pa in February 2020 to around 18,400pa by mid-2022.

Buyer demand for new housing will soften as job losses mount and consumer confidence remains low.

Developers will be reluctant to push ahead with new projects in the face of weaker buyer demand and falling house prices.

The residential construction industry risks a repeat of the severe loss of workers and capacity that occurred in the wake of the Global Financial Crisis, when consent numbers almost halved between 2007 and 2009.

It took many years for that capacity to be recovered after activity started to pick up again in 2011, meaning that the industry struggled to meet demand when economic conditions returned to normal.

Leaving aside any further increases in the waiting list, Infometrics estimates that a building programme of 9,400 state houses over two years would return the waiting list to its 2015 levels.

This initiative would support construction industry employment right across the country, echoing the 1930s experience of the Great Depression, where large-scale building work and improved social welfare outcomes combined to see the stock of state houses increase by 10,000 between 1938 and 1941.

The government has repeatedly talked up the potential of infrastructure investment as a way to support the economy’s recovery from the COVID-19 pandemic.

Although there are important issues to be addressed in the infrastructure space, reducing the state house waiting list will have a much bigger effect on society’s most vulnerable people.

We believe that tackling the social housing crisis will actively contribute to an improvement in people’s wellbeing in a way that KiwiBuild was never going to do.

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*Gareth Kiernan is chief forecaster at Infometrics.

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67 Comments

14
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I have been saying this for weeks. No brainer.
Also the govt should take over private consented sites that won't go ahead otherwise.
I am surprised we haven't heard anything from govt. Maybe they will come out with something in the budget.
Housing is much more labour intensive than infrastructure, and in my opinion is more critical.
Even Roger Douglas has advocated for this.

The big question is can Labour form a plan and deliver or just grab a National shovel ready project?
The history shows that Labour won't be able to implement something new.

Yes, they have been incompetent so that is a big question.
I don't even know if they are smart enough to prioritise housing over infrastructure...

No infrastructure within the Party.

I cannot recall the last time a member of a party was actually physically building houses, in reality. Doesn't tend to be the ministers themselves doing the building.

I cannot recall the last time a member of a party was actually physically building houses

Wouldn't do Brownlee any harm

A spell in the real world would do them good.

Anyway. It is the organising and delivery that they have difficulties with.

I agree it would do them good. I could imagine a few of them leaning on shovels or holding lollipop signs like nobody's business.

Maybe. but I think that they are working from a city full of incompetent bureaucrats. I would be interested to learn the true story behind the private enterprise chap who they bought in to head up Kiwibuild. It appeared that he ruffled the feathers of the incumbent useless Wellington government workers who then turned round and stitched him up. Their subsequent lack of success (or anything) speaks volumes.

Yeah what people don't realise is the infrastructure to get to these parcel's of land needs to be built and replaced. Many of the waste water pipes, water pipes, roads leading to the empty fields are well over due their replacement time...no point building heaps of houses if they can't plug into existing services. Wellington is a prime example of this, many other cities and regions going down the same path because of massive under investment. Councils spent rate payers dosh on increasing their salaries and staff numbers...

Oh yes, local government funding has been broken for a long time and there seems no political will reform local government.

Not enough photo opportunities and too hard.

FCM. Spot-on mate. Councils readily trot out the reason for rate increases being due to the increased costs of funding infrastructure & council services. But, hardly ever mention that a big portion of the rates would go towards earning themselves big salary increases, allowances, bonuses.Especially for the top-tier staff

Correct. Of course doing this would have a marginal impact on overall house prices

Don't tell me....
Kiwibuild has been such a failure that the Government should be let anywhere near State Housing building! Right?

25
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I'd rather have taxes spent on state house building than funnelled into landlords pockets via accomodation supplements, emergency housing grants and the like.

19
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Absolutely - but National supporters who each own 3 rentals are getting wealthy from other tax payers so want any government back housing to fail so they can continue to live as parasites from actual productivity while blaming the poor for being lazy.

Well that might be worth stating if in fact national supporter did actually own 3 rentals each.

But, of course, they don't.

exaggeration for effect. Mine is every fifth or so person on your street is a builder and every sixth has five rental properties to make up for the five who don't.

One says exaggeration, another says simply a lie.

Sometimes facts matter. Especially if you want to be taken seriously.

10
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Go and take a look at the National party members - to see where their self interest falls. Was surprised by the amount that the likes of Nathan guy owns. Farm dwelling x4, family home, 3x rental properties, another home in Wellington. Amy Adams a few...Jacqui Dean quite a few, Judith Collins, Gerry Brownlee owns about half the country. Paula Benefit owns a few. David Bennett (not benefit?) has 3 dairy farms. Nicky Wagner owns about 5. Anne Tolley has 4 commercial shops. Erica Stanford owns 3 houses. Stuart Smith owns houses, apartments, timeshares and a rental. Scott Simpson owns two family homes and a rental as well as some land. Alistair Scott owns a family home, a vineyard, and two beach properties. Shane Reti owns commercial buildings, and 3 residential properties. Parmjeet Parmar owns 5 rental properties, a family home, and commercial property. Mark Mitchell owns 3 - family home, apartment and rental. Ian McKelvie owns a family home, farm land, commercial property and apartments. Todd McClay, between organising donations from Chinese businessmen, owns 4 homes. Barbara Kuriger owns two family homes, 3 diary farms and an apartment.

And look at the number of trusts National party members have - who knows what they've got inside those. Probably more investment property!

I'm not making this s%$# up. In actual fact, might initial estimate of 3 is probably an understatement!

You start to see where our countries problems start. I'm going to start praying they don't get back into power anytime soon (even though I've been a past voter for them!)

I understand Paula Benefit was investing in property when she was a beneficiary (from my POV, most politicians are actually "beneficiaries". Sure they put in long hours, but their perks are plentiful).

Anne Tolley won't be sleeping easy with her portfolio of small retail.

All those politicians mentioned above are potentially up for a huge dent to their net worth as this unfolds.

Are you listing National Party supports or have you changed your mind to be National Party MP's?

Are you sure that's not a handful of cherry picked examples for National Party supporters?

How many rentals do you own Ralph?

1. That's none of your business.

2. None.

Sorry if I don't fit your prejudice, but that's the weakness in pre-judgements.

A year or two back the media noted that National had 3.4 houses per MP while Labour was somewhere around 1.5

Purely from financial perspective, which will cost the government less? building and maintaining state houses for about 30% of NZ population, or subsidizing wealthy landlords? I honestly do not know the answer. I just wonder if someones knows if this analysis has every been undertaken? (e.g. if we spent the present value of 10 years worth of housing subsidies for x number of people we can build y number of houses that accommodates % of the x)

How many of those 100,000 houses have Labour built?

Will National hammer Labour over lack of state building and shoot themselves in the foot [voter base], by indicating they want more houses built in as declining market?

How many Members of Parliament own shares in Fletcher Building?

~ Let the Hunger Games Begin .. ~

No problem but you can't leave this to the government. KB was and is a failure. I would'nt put FB in charge either, they can't make any project come in on budget.

Devide the land into sections and let the smaller builders do them. Lower over heads and money goes into the system and not big companies.
200 smaller self employed builds will build twice as many houses as a few big companies.

Nice thought but as I mentioned in a previous post, govt does not have the skill sets or number of capable people of managing many small builders. NP or CoL would likely go for the big boys and the only one I know of is FB. Maybe some of the others will rise phoenix like from the ashes from those that went bust in the last two or so years.

Provide the land, plans and materials and leave them alone except for the Councils.

Sounds great until you find who owns the land you are thinking of. Iwi, local govt, private free holders. Are you suggesting confiscation ?

KB was likely failing because of lack of political will as much as lack of capability from groups that could build the houses. But now is a time that forces political will for major works. And if poverty is a factor that will cause more deaths over time (talking point of the right deplorable Facebook warriors) and if people actually purport to care about that then house building is an ideal component of infrastructural work.

But we all know that this would only hold up the nonvalued added cost component of house costs and therefore prices.

If we truly wanted to have affordable housing, we should be resetting our zoning restrictions and consenting process to like they have in other jurisdictions where house prices are a stable 3x median multiple.

If there is one time in history to readdress the last 40 years of rentier crony capitalistic speculative growth, now is the time.

CV19 has gutted this distortion and given the Govt. a clean slate to allow land and houses to be developed that are truly affordable (and they will need to be) and warm, dry, and healthy (changes to the building code as well.

But here is the kicker, Govt. is the largest land and homeowner in NZ (plus what the pollies own individually as well) and does not want their asset value reduced any more than any other homeowner does. In fact, they will be looking to see if the other losses from CV19 can be sheeted into housing and they can claw back the costs somehow through the housing.

The last thing they should be doing is artificially holding up the value of NZ housing for at least the non-value part at least, which is about 50% the value of the land (including consenting costs) and therefore approx. 25% off the value of house and land.

Otherwise, they will be just building more crappy and now even more unaffordable housing.

And before we lament the pain for house and land banking owners that this will cause on the way down (which is happening anyway, it will just balance out the noise that was heard but ignored from all the people that were locked out when prices were increasing.

There could even be a case where a % of this loss in equity is depreciable, but they should not let this crisis pass without using it to reset land and consenting issues, plus our woefully inadequate building code.

"If we truly wanted to have affordable housing, we should be resetting our zoning restrictions and consenting process "

Yes, there was a lot of hypocritical nonsense spoken before the last election over cheap housing. But zero political appetite to deal with the mountain of local government red tape created over the last 30 years.

So we watch for local government reform; if there is no talk there, then they are more interested in wind than results.

But zero political appetite to deal with the mountain of local government red tape created over the last 30 year

Correct. "Political will" is more apt. You have to remember that local govt is a substantially large employee in NZ. Not just that, local govt has plenty of vested interest parties to look after as well.

Good choice of words.

Be careful what you wish for. If you want to be limited to what the zoning code says and have any sort of flexibility taken away then by all means go ahead and adopt a "resetting of zoning restrictions". Better source some illegal migrant labourers to do the construction too so that the labour costs can be kept down. The reality is that land value is the biggest cost This is to do with land supply and the availability of capital. Even if we opened up heaps more land for housing we'd still have a rampant banking industry trying to throw money at housing left right and center. The prices won't come down and we'd have a bunch of sprawling cities. Not my idea of paradise.. Housing affordability is a multi-faceted problem. Trying to pin it on urban planning is short-sighted and unhelpful.

Well I am advocating a particular cure at this point, I am more pointing to the disease.

Given how many people will be driven into poverty in the next 12-18 months this seems like a good idea, how much can be built is of course limited. But every little bit helps.

Some concerns:
1. Part of the rent increase since 2011 is government policy to drive investors out of housing. Perhaps they could reverse that policy.

2. There is a potential to create ghettos.

please no more state housing -- if we want housing for vulnerable people -- allow our Community Housing associations to build and own them -- these properties are way better maintained and looked after and have much better social supports than those owned by Kainga Ora --- Fact Kainga ora STILL have not insulated all their properties up to the standards imposed on all other landlords

This government could not build 500 houses in two years -- far less 10000 extra a year they promised -- why would anyone think they could now suddenly build them ?

The government and housing providers all agree that Nationals Housing First model has been a huge success - so why not strenghthen that and the social support organisations and NGO's that CAN DO -

As jacinda said to simon bridges -- on this side of the house you are accountable for what you say -- its not like promising 10,000 extra houses with no accountability ... oops

please no more state housing..................

Nonsense. Countries that have benefitted from state housing include Japan, Singapore, Germany, and Austria. A housing environment based around stability and a lower proportion of h'hold income is required for economic development.

This does not align with NZ's track record of successful state housing creation and it's role in creating affordable housing for older generations.

Also, the attempt at private social providers seemed to be about as successful as the half-willed Kiwibuild start. Can't rewrite that "Housing First" history that far. That's not what accountability means either.

Just bolster Housing NZ and other efforts to create more supply.

Could this government build 10,000 houses a year if house building dries up and we have thousands of idle builders?

That is a good point. They were unable to get enough builders as it was a construction boom and builders were occupied with building large houses for good money. Now, with private construction of houses being on ice, the government can be a sole customer with massive negotiation power to get good value.
Circumstances change, and something that was not feasible 2 years ago, can become feasible today

Might find a few people who were once very vocal against Kiwibuild staring into the mouth of a gift horse.

The community housing associations I have done business with have been suprisingly aggressive in their market rental pricing and added little if any new stock to their quite delapidated estates. If anything, I would question why we even allow them to be involved, seems like pointless repetition and over priced rental housing. Besides they have such small scale what real advantage do they offer in being able to reduce housing costs?

Let me guess you have a job and you own your own house.
Read my comment on 63

Cheers

Best we start to be careful about how many more houses are actually needed. I believe both tourism and immigration will be dead in the water for quite some time, and Airbnb a dead duck right behind it.
We could easily end up in overshoot. By a little that will not be an issue, by a lot would be stupid.

Best we start to be careful about how many more houses are actually needed. I believe both tourism and immigration will be dead in the water for quite some time, and Airbnb a dead duck right behind it.

No. There might be ample housing supply in QT, but only a small proportion should (or even want to) live there.

Yes, it was a wise move for the Bolger Government to sell large tracks of HNZ stock in the 90’s . Economically and socially .

Building housing for our booming population IS our economy. The government will have to jump in if new builds start faltering. They might as well finish of some of the huge developments that will go under.. A good time to start winding up the level of housing that we require.

But what is that housing that we need?
Last time, the 1950's when State Housing was all go, we had a young, dynamic population out there building family units etc. Now we have a middle-aged/aging one.
Perhaps what the Government should be building is State Housing for the aging population, that will enable them to sell down the homes they live in now and buy cheaper ones in appropriate new accommodation?
That way, prices of houses can 'adjust' for the young to buy, and not penalise the elderly. It's the net cost of relocation that matters after all.
Just a thought!

So Labour intends to:
> Do an 'end-run' on the RMA,
> Compulsory purchase land for low cost /state housing
> Overrule existing district plans and zoning

If you're not concerned about this, you've missed the point!

Labour not being subject to the RMA or councils show where the problems lie.

In the construction sector we were screaming out for this post GFC, the do nothing party did nothing...oh wait infact they did, they sold a whole lot of state houses off to their constituents and called it A Brighter Future.

Government is 100% unable to "build " anything .

We so not have tens of thousands of unemployed people we had in the 1930's , nor do we have tens of thousands of demobbed soldiers a-la 1946 to skill up to be hammer-hands

And the private sector (was ) short of skilled labour until March 2020 , I don know what it will be like post Covid

And , lastly , the Government simply does not have the money to embark on a massive Public Works program to build a house for all and sundry

We do not have tens of thousands of unemployed people we had in the 1930's

Don't speak too soon.

Why should tax payers contribute to building even more houses when for years the building industry has focused on building the wrong type of housing (so called luxury) nobody but investors was asking for?

Because of that we have ended up with more houses than we need yet most are too expensive for most to afford, a price correction is on its way but it is going to take some time.

This is just an attempt to get us to fix their mistakes with and bail them out, while they have been profiting for years from the same problem they have gotten into by themselves.

The state should have a pool of social and emergency housing of course but not this way.

The writer forgets that the until the 1970's the government did not need approval from local authorities to build anything. Sure the social housing wait list is growing. But why? Just look at the subsidies that Housing NZ gets. Through the Income Related Rent subsidies HNZ gets an average of $380 per rental. The subsidy of of private rentals through the AS is shared across 200,000 private rental dwellings but there are 600,000 private rentals in NZ. Only 40,000 social houses get the full IRRS subsidy so 15,000 social houses are rented by people who earn more and could afford to rent off the private market. The last thing we want in NZ is the government to be even more bloated with excessive staffing standing around doing no much. At the moment for every dollar I receive in rent 50% is given back to central government as tax at 33% general tax plus 15% GST and another slice is given to local government by way of rates which are only another form of wealth tax. Social housing providers pay no income tax.

300,000 of those private rentals receive welfare subsidies. Distorting and providing better yields for investors.

At least if the government builds a lot of housing it will add a bit of balance, instead of NZ taxpayers having only been subsidising property investors for the last decade plus.

China ghost cities .. here we come

Build houses to create jobs … to house people with no jobs …
Solution! build more houses to create jobs for these people …

I think we have discovered alchemy

Well we certainly haven't learned a helluva lot.

But then, we're still teaching economics. Which amounts to the same thing. The difference between a planetary population of 2 billion, with most of the fossil fuels still in the ground, and a planet groaning at the seams with near 8 billion and down to fracking, seems to escape this economics-trailed lad.

Pity. He should realise that some of us have seen it coming and reversed Semple - I've parked up my crawler and gone for wheelbarrows. (He, if I remember rightly, expressed the arrogance of homo-thinks-itself-sapient by driving a bulldozer over a wheebarrow,,,,)

Having a "nest" to protect oneself from the elements is one of the true basic human needs. It is also surely one of the basic responsibilities of any child on attaining adulthood to provide that nest for him/herself and for their family in due course.
To shift these needs and responsibilities onto the state and away from the individual citizen is in my opinion a recipe for social disaster. As others have observed, it is acceptable for the state to maintain a stock of temporary and emergency housing as an issue of national "insurance" for individuals who for one reason or another fall through the cracks.
Over my lifetime I have seen huge increases in a sense of entitlement,...not just of " a" dwelling to be provided by someone/anyone, but an expectation that the home will be large and come fully equipped with all new modcons.
One can perhaps excuse socialist governments for catering for unrealistic expectations...after all private enterprise is not their game. But surely middle NZ should expect a balancing in the other direction from our many National governments. Fat chance!
As we have recently seen, a large number of us believe in the tooth fairy and the Easter Bunny.

My parents were given a new State house in which to live in the 1950's. They were hard working people and after 6 years they saved enough to buy their own home. Dad had 2 jobs and Mum worked from home with 3 children. We had a vegetable garden and fruit trees.

I admit times have changed, the affordability of housing is out of reach for many.
However each day I see some of NZ's laziest people living state provided housing. Just this week a tenant in a social house where I was working had bought takeaways for lunch and smoked cigarettes. That afternoon a food parcel was delivered from a charity.
The property inside and out was a tip. 'Lazy Lazy Lazy,' I forgot we have been asked to be kind by our Prime Minister. Walk a mile in another persons moccasins.
There needs to be paradigm shift in regards to how state funded housing is provided. Each week I repair or replace fixtures that have been intentionally damaged for Kainga Ora (Housing New Zealand).
"If I don't have a financial stake in the property, then why should I look after it?" That is my point, if a tenant is allowed to build some equity in the property in which live then they will an incentive to look after it.

Believing we had the right to own the Earth is what started all this shite!!

Like Spain, stopping AIRBNB international tourism, in favour of housing/holidaying our own, would be a good start.

We should use all available forms of accommodation first then see where we're at and a big rethink on price expectations too!

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